Got the same here.
i was purchasing Items at Marketplace arroung 2 to 3 AM in the Morning. And after some Transfers i got the Error Message - since then i cant use Paypal to exchange Linden at Marketplace, Webpage or inworld. It worked for almost 1 year now.
Its a German Paypal Account and nothing has been changed - i tried delete and renew to Account at Second Life but it still doesnt work.
And it looks like that the Problem is at LL Side cause i cant see any rejected transfers or requests in my Paypal Historie.
Not Transfer Limits are reached - other Paypal Transfers work fine....
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